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SEGMENTSSteel: High demand for carbon steel flat products
After an already pleasing performance in the first half of the fiscal year, the continued positive market environment led to a further significant expansion of business in the Steel segment in the reporting quarter. In terms of value, order intake increased against the comparable prior-year period by 24% to €2.8 billion, reflecting both increased volumes and steel prices. Climbing by 12%, sales likewise reached €2.8 billion, mainly as a result of higher shipments. The record average revenue per ton of the prior-year quarter was maintained. In the Steelmaking business unit, which comprises the metallurgical operations in Duisburg and the logistics activities, crude steel production was on a par with the year before at 3.5 million metric tons. A reduction in slab purchases from Hüttenwerke Krupp Mannesmann caused by a further disturbance at the plant was not completely offset by increased output in our own meltshops. To meet increased customer demand for finished products and secure a full workload for our processing operations, slabs were outsourced. The business unit's sales of pig iron, slabs and energy to external customers were higher than a year earlier as increased raw material costs were passed on. With customers in the steel processing sectors continuing to enjoy a good workload, the Industry business unit recorded significantly higher shipments, especially for hot strip and hot-dip coated material. It was not possible to fully meet demand, especially for heavy plate. Sales at the European steel service centers were at the same level as the year before; increased volumes, above all in the core primary processing business, compensated for the price reductions necessary in the long-term contract business. The construction elements activity reported higher sales, with the significant expansion of the building construction group more than compensating for the negative development in cold room construction. The Auto business unit, which supplies the global auto manufacturers, expanded its business with only a slight increase in shipments. This was primarily attributable to the price increases implemented in the long-term contracts at the start of the year. At Tailored Blanks sales increased as a result of higher volumes and prices. The ramp-up of the production sites in China and Sweden had a positive effect. The steel service activities in North America benefited above all from the expansion of business with a major customer. The Processing business unit achieved an encouraging increase in sales. The significant growth in the tinplate business reflected volumes and revenues. Following the successful ramp-up of the new facilities at the Andernach location, it was possible to increase shipments. At Hoesch Hohenlimburg, inadequate supplies of starting material from Hüttenwerke Krupp Mannesmann led to a decline in sales of medium-wide strip. Business with grain-oriented electrical steel remained very favorable. Thanks to lively demand from China and India, shipments and revenues were considerably higher than in the corresponding prior-year period. The Steel segment increased its 3rd-quarter profit by €15 million to €382 million. Substantial improvements in net revenues and shipments more than compensated for the significant price increases for raw materials and higher processing costs. The Steelmaking business unit returned a distinctly improved profit compared with the prior year, mainly as a result of higher revenues for byproducts and commodities. The price increases for raw materials, energy and freight were passed on to the other business units. The Industry business unit's earnings fell short of the high prior-year level. Higher shipments and net revenues were outweighed by the increased costs for starting materials, energy and zinc. The European steel service centers were unable to offset the price increases for starting material with increased volumes and thus failed to match their high prior-year profit. In a continued difficult market environment, construction elements returned a slightly improved profit. The Auto business unit increased its earnings despite the sharp rise in costs for zinc thanks to a distinct rise in net revenues coupled with a slight increase in shipments. Tailored Blanks improved its profits through higher shipments and the implementation of efficiency enhancement measures. Earnings of the North American steel service activities increased significantly on the back of higher sales volumes. The Processing business unit achieved a significant increase in income, to which the electrical steel operations made a major contribution. The tinplate operations also returned a distinctly higher profit; increased shipments and prices outweighed the higher costs for starting material and processing. In medium-wide strip profit fell short of the high prior-year level. Stainless: Rising stainless steel prices
At Stainless the business situation improved considerably in the 3rd quarter 2005/2006. Against the prior-year quarter, order intake increased by 28% to €1.9 billion. Contributing factors were a significant increase in demand for stainless products and continued lively replenishment activity in the European trading segment. The business units ThyssenKrupp Acciai Speciali Terni and ThyssenKrupp Nirosta made a large contribution to this performance. The Shanghai Krupp Stainless business unit likewise reported high growth, reflecting a recovery in demand from the Chinese market and improved prices. In the high-performance alloy business, orders received for nickel alloys remained at a high level, while orders for titanium semis tripled on the back of expanding global demand. Overall, Stainless's shipments in the reporting period were 4% higher than in the comparable prior-year quarter, in particular due to higher deliveries of cold-rolled strip. Stainless achieved sales of €1.7 billion in the 3rd quarter 2005/2006. This 5% year-on-year improvement mainly reflects the strong recovery of the European market, which brought with it significant base price increases, and a positive market environment in the NAFTA region. ThyssenKrupp Nirosta and ThyssenKrupp Acciai Speciali Terni profited considerably from the extremely high demand in Europe in the period under review. Despite a fire at the Krefeld cold-rolling mill, ThyssenKrupp Nirosta will be able to meet customer orders for the most part by systematically redistributing volumes within the ThyssenKrupp Stainless group. ThyssenKrupp Mexinox profited from the positive development on the North American market, which was reflected in both higher base prices and increased supply volumes. Shanghai Krupp Stainless benefited from increased demand for cold-rolled stainless steel flat products on the Chinese market and improved prices. However, prices remained lower than in Europe and North America. Added to this, the lack of an alloy surcharge system meant that the impact of the hefty price increases for raw materials, in particular nickel, could not be cushioned. The significant growth in sales of nickel alloys reflects not only the high cost of raw materials but also the price level improvements on the back of continued high demand especially in the plant engineering, aerospace, energy, oil and gas sectors. The Stainless segment's profits were €54 million higher than a year earlier at €126 million. The German and Italian activities returned slightly improved profits compared with the prior-year quarter. The strong upswing in demand in the European markets since the beginning of 2006 continued in the 3rd quarter of the fiscal year in almost all customer sectors. In this positive market environment the European plants pushed through several base price increases. While this led to an improved price level compared with the prior-year quarter, pressure on margins increased further in the reporting quarter. Alongside energy and logistics, the main contributing factors were the increases – in some cases extreme – in the cost of raw materials, particularly nickel. Mexinox achieved a marked increase in profits. The North American market showed a positive development in the reporting period, reflected in both higher base prices and increased supply volumes. Having posted a loss in the comparable prior-year quarter, Shanghai Krupp Stainless returned a small profit. Following the slump in prices in 2005, the recovery which began at the start of 2006 continued in the 3rd quarter. On the back of the positive situation on the engineering, aviation, oil and gas markets, demand for nickel alloys remained strong. In this favorable market environment the nickel alloys business unit achieved significant growth in profits. Automotive: Systems business expanded
The Automotive segment achieved sales of €2.1 billion in the 3rd quarter 2005/2006 on the back of a slight recovery of key automotive markets. This was a slight improvement on the prior-year quarter. The appreciation of the Brazilian real and the US dollar against the euro also had a positive impact. It should also be considered that the prior-year figures included sales from the since-sold truck springs activities and the North American aluminum castings business. Sales at the Body business unit were down from the prior-year level, mainly due to lower volumes at the stamping plants. In the Body Structure business, volumes declined in particular at the North American and French stamping plants. Higher billings for tooling at the German stamping plants as well as volume- and price-driven sales growth at the North American foundries had a positive effect. The Chassis business unit recorded a clear increase in year-on-year sales overall. The Chassis Structure unit contributed in particular to this growth. This improvement was partly due to significant growth in the systems business thanks to the ramp-up of new plants in North America and Germany. The disposal of the truck springs business and the North American aluminum casting activities had the opposite effect. The increase in sales at the Powertrain business unit was largely attributable to the Crankshafts business and was mainly due to exchange rate effects resulting from the strengthening of the Brazilian currency against the euro. In the Camshafts business, the start and ramp-up of new passenger car projects and higher volumes for current production operations resulted in higher sales. The Automotive segment recorded a profit of €33 million, compared with €43 million in the comparable prior-year quarter. A comparison of the periods must take account of major effects from restructurings and disposals: the reporting quarter included restructuring charges in North America of €24 million, while the prior-year period included the €10 million loss on the disposal of the European truck springs business. Before restructuring measures, the earnings of the Body business unit fell just short of the strong prior-year level. This was mainly due to declining capacity utilization at the French stamping plants and increases in scrap prices at the American foundries. The Chassis business unit achieved a significant increase in its profits before restructuring measures. Alongside the improvement in operating performance at the British stamping plants, higher earnings in the Steering and Suspension units also played a part in this. The Powertrain business unit returned a significant profit level with the prior-year quarter. Technologies: Strong earnings trend continues
The pleasing performance of the Technologies segment continued in the 3rd quarter 2005/2006. Despite disposals, order intake at €1.3 billion showed an improvement against the prior-year quarter. This was largely due to higher orders at Marine Systems. The situation for special plant construction projects remained good, mainly due to high global demand for raw materials. Middle Eastern countries in particular had a higher influx of foreign currency due to rising oil and gas prices and were therefore able to step up their investments in the industrial sector. Demand also increased for oil sands mining projects, for which Plant Technology offers processes and technologies. At just under €1.5 billion, sales fell slightly short of the high prior-year level. This was mainly due to disposals and the high sales from major orders realized in the 3rd quarter of the prior year. However, the first nine months of fiscal 2005/2006 showed a significant improvement versus the corresponding year-earlier period. 3rd-quarter sales at Plant Technology were lower than the prior-year period, which was boosted by billings from major orders. However, a comparison of the 9-month periods confirms that sales were at the high level of the previous year. Significant growth in sales of cement plants and material handling equipment contributed to this. At Marine Systems, sales and order intake were both up from the prior-year period. The order situation improved significantly thanks to orders for two container ships and a mega yacht. 3rd-quarter sales at Mechanical Engineering were down from the prior year, mainly due to disposals carried out in the meantime. Excluding disposals, sales were higher. Business with large-diameter bearings and construction equipment components continued to develop positively. As a further step toward optimizing the portfolio and concentrating on core activities, the sale of the Noske-Kaeser group – which offers air-conditioning and ventilation plants, systems and equipment as well as fire-fighting equipment and ABC protection technology – was initiated in the reporting quarter. The sale was consummated on July 06, 2006. Income at Technologies rose by €57 million to €90 million. This was mainly attributable to the significant profit increase at Plant Technology, but Mechanical Engineering and Marine Systems also achieved substantial earnings improvements. Mechanical Engineering once again made the biggest contribution to earnings. The prior-year 3rd-quarter earnings of the MetalCutting business unit, which was sold in October 2005, are posted under discontinued operations. The significant rise in profits at Plant Technology is attributable to higher sales of cement plants and materials handling equipment and the absence of expense from the fair-value recognition of currency hedges, which negatively impacted the prior-year quarter. Marine Systems also increased its profit, mainly as a result of higher sales and improved order earnings as well as cost reductions due to restructuring measures. Good workloads and the disposal of loss-making businesses as well as the absence of expense from the fair-value recognition of currency hedges enabled Mechanical Engineering to improve its profit at a high level. Transrapid reported a reduced loss, mainly due to the absence of restructuring expense and lower depreciation. Elevator: Further positive impetus from new installations business
As in the prior quarters, Elevator remained on a growth track in the 3rd quarter 2005/2006. Order intake rose 14% to €1.2 billion and sales were up 14% to €1.1 billion. This performance was boosted by positive exchange rate effects. Business volume expanded particularly as a result of strong new installations business, primarily in North America. There was also a positive trend in Europe, albeit less pronounced, but price competition remained fierce. The global service business also performed pleasingly. The Central/Eastern/Northern Europe business unit increased its order intake and sales, with all regions contributing to the improvement. One highlight was the situation in France, where modernization business in particular was expanded. The United Kingdom showed first signs of stabilizing, with orders once again higher than a year earlier. By contrast, orders at the Southern Europe/Africa/Middle East business unit did not quite match the prior-year level, mainly due to a decline in infrastructure projects on the Iberian peninsula. However, year-on-year sales were up in all regions, in some cases substantially; the first-time inclusion of the newly acquired SIAR in Italy made a contribution to this. The Americas business unit further expanded its business volume in both North and Latin America. With demand for new installations remaining high, order intake rose significantly, while the systematic expansion of modernization and service activities boosted sales. In both cases, positive exchange rate effects also had a positive impact. Although orders were up on the prior year, the Asia/Pacific business unit was unable to improve on its sales. This was mainly due to the continuing difficult situation on the South Korean market, where sales in particular were down from the year-earlier quarter. Growth in China was unable to fully offset this drop in sales. Overall, the business unit expanded its presence in Southeast Asia, partly through its newly acquired Taiwanese activities. The Escalators/Passenger Boarding Bridges business unit recorded improvements in both orders and sales. The Escalators business in particular profited from the rising demand for new installations. The significant growth in air traffic also enabled the Passenger Boarding Bridges unit to expand its year-on-year business volume. The Accessibility business unit continued to grow. Its strong local market presence and efficient use of all sales channels led to further increases in orders and sales in all key European and American markets. This effect was reinforced by the reallocation of some European Accessibility activities, which had previously been assigned to the Elevator organization. The Elevator segment returned a profit of €98 million, compared with €79 million in the comparable prior-year quarter. In an aggressively priced market environment, the segment improved its operating earnings mainly due to efficient use of production volumes and the continued expansion of its service activities. By contrast, expense from the restructuring program currently being carried out in Korea impacted negatively on earnings. Positive factors included effects from the valuation of currency hedges and the exchange rate trend. The Central/Eastern/Northern Europe business unit exceeded its prior-year profit. In addition to higher production capacity utilization, this was partly due to the positive market trend in France, where the modernization business in particular generated additional earnings. Income was once again higher in the United Kingdom, aided by the first positive effects of the completed restructuring program. The year-on-year increase in earnings at the Southern Europe/Africa/Middle East business unit was mainly due to income from the valuation of currency hedges. Operating earnings continued to be impacted by increasing price pressure, in particular in Spain and Portugal. The Americas business unit achieved significantly higher profits. In addition to earnings improvements as a result of efficiency-enhancing measures, particularly in production, income was boosted by additional orders acquired by the field activities. The translation effect from the increased value of the US and Canadian dollar against the euro had a further positive impact. The Asia/Pacific business unit recorded negative earnings in the reporting quarter due to restructuring expense in South Korea. The restructuring program was the business unit's response to the sharp increase in competitive pressure resulting from the ongoing weakness in particular of the new installations market. The unit's activities in China, India and Southeast Asia increased their profits. The Escalators/Passenger Boarding Bridges business unit reported profit growth. This included positive effects from the valuation of currency hedges as well as income from the sale of the Spanish die-casting activities. The business unit also achieved a slight improvement in operating earnings. The profit situation in the Accessibility business unit remained steady. The American activities in particular profited from the expansion of the sales network, while growth in the European market also contributed to the business unit's stable performance. Services: On course for a record year
Services achieved its highest-ever quarterly sales of €3.8 billion. This was a 15% improvement on the prior-year quarter, which included all sales from the printing operations and machine tool trading activity, both of which have since been disposed of. Alongside significant improvements on the markets for raw and industrial materials, positive effects in the 3rd quarter 2005/2006 came in particular from the segment's portfolio optimizations, efficiency-enhancement programs and sales initiatives. All companies and activities established or acquired in the current fiscal year performed well and contributed to the segment's business success. The addition of new companies and expansion of activities in virtually all regions resulted in a 4,000 increase in the workforce to almost 39,000. The recovery in demand for materials which started in the 2nd quarter 2005/2006 gathered pace in the 3rd quarter. As a consequence, prices rose sharply, in particular for specialty steel and nonferrous metals, but also for rolled-steel products. There were demand overhangs with long delivery periods in almost all areas. Based on their good customer and supplier relationships and their sophisticated warehousing and logistics organizations, the Materials Services Europe and North America business units significantly expanded their business in this market environment and set new sales records. Growth in the NAFTA region was stronger than in Europe. The booming US market was also the main reason for the strong increase in sales at the Industrial Services business unit. Business in Germany and Scandinavia also showed particularly pleasing expansion. The energy sector is developing into an increasingly important customer. The Special Products business unit further increased its sales. Although it was not quite possible to match the prior-year period's extremely high sales of rolled steel to the Far East, the raw materials and in particular technical trading activities were significantly expanded with numerous new projects. The Services segment generated a profit of €168 million, €66 million or 65% higher than the comparable prior-year quarter. Materials Services Europe, the highest-earning business unit which in addition to the European activities also comprises the activities being developed in South America and Asia, improved its profit by a third year on year, having fallen short of the prior-year levels in the first quarters of the fiscal year. The Materials Services North America business unit more than quadrupled its profit. In both regions, growth in the nonferrous metals business combined with exceptionally high prices was instrumental in the significant profit increases. Earnings at the Industrial Services business unit were up by roughly 50%. The majority of this growth was attributable to the North American service activities, but the performance programs in Germany also had a lasting effect. The Special Products business unit improved its high year-earlier profit by more than 50%. All activities contributed to this, with significantly higher income generated not only by the rolled steel and tubular products businesses but also the technical trading and raw materials activities. Corporate includes the Group's head office and internal service providers as well as inactive companies not assignable to the individual segments. Also included here is the non-operating property, which is managed and utilized centrally by Corporate. Sales of Corporate were €26 million, compared with €29 million in the prior-year quarter. Corporate incurred expenses of €87 million, an improvement of €29 million against the corresponding prior-year figure. A key contributing factor was lower interest expense for net financial liabilities and pensions. It should also be considered that the prior-year figure included a charge for risk provision. Consolidation mainly includes the results of intercompany profit elimination. |
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